In his latest Coffee Break Briefing webinar, Frettens own Insolvency Guru Malcolm Niekirk held his second session on Insolvent Partnerships, giving some case studies on the notoriously difficult area. This is the summary of that briefing.
How much does debt recovery cost?
The estimated costs set out below apply where your claim is in relation to an undisputed simple debt claim and generally arising from unpaid invoices. The costs set out do not include the cost of enforcing any judgement obtained.
If the other party disputes your claim at any point, we will discuss any further work required and provide you with revised advice about costs, if necessary, which could be on a fixed fee (e.g. if a one-off letter is required), or an hourly rate if more extensive work is needed.
VAT is payable on our fees at a rate of 20%.
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Free initial meeting
Our estimated prices for undisputed debt recovery matters with a value up to £100,000 are outlined below.
It should be noted that the below prices are guidelines only and the actual costs will depend on a variety of matters such as the complexities of your case and the value of the debt.
Each case is different, which is why we offer a free initial meeting to discuss the specifics of your case following this meeting a more accurate cost estimate will be provided to you.
To arrange a free initial meeting, you can call us on 01202 499255.
Pre- Action Costs
Review of documents and merits
As part of our onboarding process, we may need to conduct a review of all relevant documents, which includes any contract documents, any prior correspondence between you and the debtor and any terms of sale/terms and conditions. The likely timescales and fees will depend on the volume and types of documents received but we would estimate that the initial review will incur a cost of around £100- £200.
Letter Before Claim
A Letter Before Claim is a prerequisite to issuing a claim and aims to set out the circumstances in the debt falling due and to provide the debtor with an opportunity to make payment without escalation. If the debtor is an individual (including sole trader) they will be afforded 30 days to make payment or to respond to the letter and if the debtor is a company, it will need to respond to a letter in a reasonable timeframe - usually 14 days in a straightforward case.
If the claim is a simple debt claim and generally under £25,000 preparing and sending a Letter Before Claim will cost between £250 - £500. If complex and/or over £25,000 the fee for sending a letter may exceed £750.
Issuing a Claim
If no response is received from the debtor by the time the Letter Before Claim expires, we will provide you with advice on the next steps and the merits of your claim. The estimated costs for issuing a claim to obtaining judgement are outlined below:
| Debt Value | Court Fee | Our Fee |
|---|---|---|
| Up to £10,000 | From £35-£455 depending on the value of the claim | £750 to £1500 + VAT |
| £10,001 to £25,000 | 5% of the value of the claim | £1500-£2500 + VAT |
| £25,001 to £100,000 | 5% of the value of the claim | From £2500 + VAT |
It will take 5-10 working days for us to prepare and send your claim to the Court. Once in receipt the Court usually takes a couple of weeks to issue and serve the claim on the debtor. The debtor has 14 days to file an Acknowledgement of Service. If an Acknowledgement of service is filed, they will be afforded an addition 14 days to submit a defence.
If an Acknowledgement or Defence is not filed, then the next step would be to request Judgment in default (a County Court Judgment) which would essentially end the proceedings. The judgment could be enforced if it remains unpaid (more on this below). Our fee for this would be from £100.
If the debtor were to file a Defence, the matter becomes disputed, and we will be in touch with the anticipated fees and costs of taking the matter forward. As a rough guide, it can take up to a year for those matters to go before the court.
Enforcement
If the debtor fails to pay the judgment when the Judgment falls due, there are methods in which the Judgment can be enforced. These methods include but are not limited to instructing bailiffs or High Court Enforcement agents to attempt to recover the debt, obtaining a charging order against any assets or property the debtor has or obtaining an attachment to earnings order.
We would advise you of the various options, the recommended method and anticipated costs if enforcement is deemed necessary following Judgment.
Winding up/ Bankruptcy
As an alternative to issuing a claim you can apply to the Court to issue winding up proceedings if the debtor is a company or bankruptcy proceedings if the debtor is an individual (or sole trader). If a company, the debtor would have to owe more than £750 to proceed with proceedings and if an individual more than £5,000.
The first step would be to issue a statutory demand that affords the debtor 21 days to make payment. Our fee for this would be from £350. The fee for taking this forward is outlined below:
| Court fees and disbursements | Our fee |
Bankruptcy | £332 – Court fee £1,500 – Petition Deposit £104.76 – Advertising Fee | From £1,750 plus VAT |
Winding up | £332 – Court Fee £2,600 – Petition Deposit £104.76 – Advertising Fee | From £2,500 plus VAT |
Other fees and disbursement
There are other fees that you may have to pay in the course of your matter for example you may require:
- a process server to serve a document personally on the debtor. The fee for this would be from £100 plus VAT
- a tracing agent to either trace the debtor or provide an asset report. The fee for this would be from £150 plus VAT.
- Counsel (a barrister) to represent you in court. The fees will depend on the value of the debt but could cost any were from £500 – £2,000 for a lower value debt and £2,500- £10,00 plus for the higher value debts.
This is not an exhaustive list, and we will advise you of any anticipated disbursements upon instruction and throughout the course of your matter.
Important Information
- We cannot guarantee that your debt will be recovered in part or in full
- We cannot guarantee that any or all your costs can be revered, that is especially true if there is no contractual entitlement for costs. We will provide further advice on this should you instruct us.
- The VAT element of our fee cannot be reclaimed from your debtor.
- Interest and compensation may take the debt into a higher banding, with a higher cost.
- We charge on an hourly rate basis, and therefore the actual fees may be more or less than that quoted above
